Post on 14-Jul-2020
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Northumberland, Tyne and Wear NHS Foundation Trust
Board of Directors Meeting
Meeting Date: 22 March 2017
Title and Author of Paper: NTW Subsidiary Company (NTW Solutions) –
Business Case
Malcolm Aiston – Director of Estates and Facilities
Executive Lead: James Duncan, Deputy Chief Executive and Director of Finance
Paper for Debate, Decision or Information: Decision - to set up NTW Solutions as
subsidiary company, wholly owned by the Trust.
Key Points to Note:
The Business Case sets out the strategic context around the future delivery of support services in the NHS and considers service model options for the future provision of the Trust’s estates, facilities, procurement and financial and workforce transactional services.
The identified preferred option, taking into account a range of factors described in the business case, is that the Trust sets up a wholly owned subsidiary company (NTW Solutions), under the powers of the Health and Social Care Act 2003. The business case outlines the benefits which this would deliver. An increasing number of public authorities have, and are, setting up similar subsidiary companies.
Communications and engagement with staff is outlined, including the themes which have been raised in TUPE consultation with staff and their representatives. A key point is that a “letter of comfort” has been received regarding continued access to the NHS Pensions scheme for the existing staff who would TUPE to the new company.
Setting up the company would involve the transfer of some assets to the company, including 25 year leaseholds on some properties, funded through a combination of loan and equity funding. An Operated Healthcare Facility contract and Service Level Agreements would be agreed between the Trust and NTW Solutions, based upon commercial terms, and the provision of services would be managed through these documents.
Agenda item 10 ii a)
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NTW Solutions, as a wholly owned subsidiary of the Trust, would be part of the “NTW Group”. Governance arrangements, set out in the Company’s Articles of Association, Standing Financial Instructions (SFIs) and a Schedule of Reservation and Delegation, identify matters and decisions which would be reserved to the Trust and decisions which would be delegated to the Company. These documents would all be agreed by the Trust. The Company’s Articles and the SFIs are presented in an accompanying paper for approval, should this proposal to set up NTW Solutions be approved.
Risks Highlighted to Board :
Risks are highlighted in the Business Case
Does this affect any Board Assurance Framework/Corporate Risks?
Please state Yes or No: Yes
If Yes please outline - Workforce and Financial related risks
Equal Opportunities, Legal and Other Implications:
Bond Dickinson employed as legal advisers to ensure legal compliance
Outcome Required: The Board is asked to
To consider approval of the Business Case recommendation to proceed with establishing the Company and the transfer of assets and services to the Company
To resolve that this is in fulfilment of the Trust’s principal purpose and in fulfilment of making additional income available in order to carry out the Trust’s principal purpose; and that this is within the powers of the Trust
That two directors are identified and authorised to sign the attached schedule of relevant documents (attached to this covering paper) on behalf of the Trust
Link to Policies and Strategies: Operational Plan, Financial Delivery Plan,
Workforce Strategy
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SCHEDULE
Relevant Documents
The Asset Transfer Agreement and its Schedules between (1) Trust and (2)
Company. This document deals with the transfer to the Company of all assets
(eg properties, contracts, vehicles, plant and machinery) that the Company
requires in order to provide the Services and the value of the assets which is to
be paid by the Company to the Trust. This is paid for by the Company by way of
a loan from the Trust and a share issue to the Trust.
The Operated Healthcare Facilities Agreement and its Schedules between (1)
Trust and (2) Company. This document deals with the provision of the services
by the Company to the Trust in order to provide an operated healthcare facility at
each relevant site. A separate specification for each service with appropriate
KPIs is included in the agreement. The Trust is obliged to pay the agreed
charges for the Services received. The term of the agreement is 25 years.
The Lease of Silverdale between (1) Trust and (2) Company. This document
deals with the transfer of the property to the Company under a long term lease
(25 years). This will include a premium payable by the Company to the Trust.
The Lease terminates automatically if the Operated Healthcare Facilities
Agreement is terminated for any reason.
The Lease of Rose Lodge between (1) the Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Monkwearmouth Hospital between (1) Trust and (2) Company.
This document deals with the transfer of the property to the Company under a
long term lease (25 years). This will include a premium payable by the Company
to the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Hopewood Park Hospital between (1) Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Greenacres Hospital between (1) Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
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The Lease of Ferndene Hospital between (1) Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Brooke House Hospital between (1) Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Plessey Centre between (1) Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of St Nicholas’ Hospital between (1) Trust and (2) Company. This
document deals with the transfer of the property to the Company under a long
term lease (25 years). This will include a premium payable by the Company to
the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Northgate (main) Hospital between (1) Trust and (2) Company.
This document deals with the transfer of the property to the Company under a
long term lease (25 years). This will include a premium payable by the Company
to the Trust. The Lease terminates automatically if the Operated Healthcare
Facilities Agreement is terminated for any reason.
The Lease of Northgate (Blocks 21, 32 and 99a) Hospital between (1) Trust and
(2) Company. This document deals with the transfer of the property to the
Company under a long term lease (25 years). This will include a premium
payable by the Company to the Trust. The Lease terminates automatically if the
Operated Healthcare Facilities Agreement is terminated for any reason.
The Lease of Northgate (Blocks 26, 27, 28, 29 and 30) Hospital between (1)
Trust and (2) Company. This document deals with the transfer of the property to
the Company under a long term lease (25 years). This will include a premium
payable by the Company to the Trust. The Lease terminates automatically if the
Operated Healthcare Facilities Agreement is terminated for any reason.
The Loan Agreement between (1) Trust and (2) Company and ancillary
documents. This document deals with the loan from the Trust to the Company in
order for the Company to pay for the assets under the Asset Transfer Agreement
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and the premium under the Lease. The term of the loan is 25 years and the
interest rate on the loan is 3.5%.
The Estates Management Services Agreement and its schedules between (1)
Trust and (2) Company. This document deals with the provision of estate
management services by the Company to the Trust in respect of the other sites
of the Trust not included within the Operated Healthcare Facility Agreement. A
separate specification for each service with appropriate KPIs is included in the
agreement. The Trust is obliged to pay the agreed charges for the Services
received. The agreement remains in force until terminated by either party on 6
months' notice.
The Service Level Agreement and its schedules between (1) Trust and (2)
Company. This document deals with the provision of certain back office and
other services by the Trust to the Company and payment by the Company for
such services. The agreement remains in force until terminated by either party
on 6 months' notice.
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Proposal to establish an NTW
Subsidiary Company
Business Case
March 2017
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CONTENTS
1. Background and Purpose
Background
Purpose
Objectives
Strategic context
Scope of the proposal
2. Current service provision
Staff numbers and budgets
Service performance
3. Case for Change - Summary
4. Option Appraisal
Objectives and benefit criteria
Identification of options
Option appraisal
Identification of Preferred Option
5. The Preferred Option
Benefits
Staffing
Financial Model
Asset Transfer
Governance Arrangements
Operational Working
Information Governance
6 Communications and Engagement
Communications and Engagement Group and Plan
Communications with Stakeholders
Responses
Next Steps
7 Progressing the Proposal - Implementation
Project Management
Risk Management
Key tasks, timescales and external approvals
8 Project Evaluation / Benefit Realisation
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9. Conclusion
Appendices
1. Service level agreements for services to be provided by the subsidiary
company.
2. Outline Implementation Plan – key tasks
3. Risk Management
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1 BACKGROUND AND PURPOSE
This section describes the background to the proposal; the purpose of the
business case; the objectives of the proposal; the strategic context; and the
scope of the proposal.
1.1 Background
Under the Health and Social Care Act 2003, Foundation Trusts became legally
defined as independent public benefit corporations, which includes the freedom to
set up subsidiary companies. An increasing number of Foundation Trusts have
utilised these freedoms to set up wholly owned subsidiary companies including
locally, QE Facilities Ltd in Gateshead and Northumbria Healthcare Facilities
Management Ltd. Local Authorities have established similar subsidiary companies
under their powers.
In June 2016, NTW Executive Directors considered the proposal to set up a
subsidiary company to provide estates, facilities, procurement and transactional
services. Following on from this the Trust Board of Directors gave approval in
September 2016 to proceed with the early stages of work to progress the proposal.
A Project Board, including two non-executive directors, and a Project Team were set
up to take this forward. This has enabled work to progress to further develop the
proposal, as described in this Business Case.
1.2 Purpose of this document
The business case has been developed for Trust Board approval to establish the
company. It describes and presents:
the current services being considered;
the case to change the way these services are provided for the Trust;
identifies different models of provision;
evaluates these options;
provides more information on the preferred option; and
outlines the next steps to establish the company from 1 April 2017
1.3 Objectives of the Proposal
The proposal is that NTW sets up a wholly owned subsidiary company, with NTW as
the only shareholder, to provide estates and facilities; procurement; and financial and
workforce transactional services to the Trust. Where possible, this would be
provided as an “Operated Healthcare Facility” where the company would lease or
own the properties concerned and provide the support services through a detailed
contract based on commercial terms. On other sites where an Operated Healthcare
Facility contract is not possible, services would be provided through Service level
Agreements (SLAs), also based upon commercial terms.
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The objectives are to:
provide high quality support services
provide a cost effective service, supporting NTW in delivering sustainable and
safe clinical services
offer opportunities and security to NTW staff;
to create more flexibility to address specific workforce pressures and risks;
and
provide greater flexibility and freedoms to enable commercial opportunities to
be seized and generate income to the Trust
1.4 Strategic Context
1.4.1 At national level there are drivers to reduce support services costs through
implementation of the Carter Report recommendations and through NHS
Improvement’s Sustainability and Transformation Plans (STPs). The Carter Report
(Operational productivity and performance in English NHS acute hospitals:
Unwarranted Variations, February 2016) recommendations included:
improvements in procurement services to deliver a reduction of at least 10%
in non-pay costs across the NHS by April 2018
that all trusts’ corporate and administration functions should rationalise to
ensure their costs do not exceed 7% of their income by April 2018 and 6% of
their income by 2020 (or have plans in place for shared service consolidation
with, or outsourcing to, other providers by January 2017), so that resources
are used in a cost effective manner.
The Carter Report recommendations are being progressed by NHS Improvement,
through a “Carter Productivity Programme”, working with selected Trusts to progress,
implement and share lessons across the NHS. The Carter Review has recently
been extended to cover community and mental health trusts - NTW is one of 20
Trusts taking part in this, with the findings expected to be published in late 2017.
Also at a national level, NHS Improvement’s STP planning process includes the
requirement to review support services functions and develop plans for shared
service arrangements. There is a very strong direction from NHS Improvement to
deliver financial savings from support services savings nationwide, within the context
of the NHS Five Year Forward View.
1.4.2. Regionally, the local STP for Northumberland, Tyne and Wear and North
Durham has identified a need to deliver £641m savings from a range of solutions,
including £31m from “shared back office arrangements”, to help bring the local health
system into overall financial balance by 2020/21. The STP plans are at the early
stage of information gathering and the service areas to be included in future shared
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services arrangements are still under consideration. It is considered that the
implementation of these arrangements would not realistically be able to be
implemented before 2018/19 and possibly later.
Closely aligned to the STPs, NTW is actively involved in the North-East Regional
Streamlining Programme, which is looking to demonstrate how administrative
functions which support clinical and care providing staff can reduce time and costs
associated with recruitment, training and occupational health. This process will allow
NHS organisations to share best practice and learning. The programme will help in
taking forward this proposal.
1.4.3 At NHS Trust level, our Operational Plan for 2017-19 identifies the intention to
establish a subsidiary company to provide improved support services. This proposal
is in the context of the Trust’s priorities, which include:
being a sustainable and consistently high performing organisation
being a model employer, an employer of choice and an employer that makes
the best use of the talents of the entire workforce
The recent “Outstanding” rating received from the Care Quality Commission provides
very strong assurance that we are a high performing Trust. However, we need to
sustain this whilst also delivering the requirement for all Trusts to deliver a 2%
annual saving for the remainder of this Parliament. Our Operational Plan aims to
deliver £10.6m savings in 2017/18 (£8.8m recurring and £1.8m non-recurring) and
£6.8m in 2018/19. The Plan identifies savings of £1.5m recurring in 2017/18, rising
to £3m in 2018/19, being delivered by the subsidiary company.
Our workforce strategy recognises staff as being our greatest asset in being able to
deliver outstanding services. However, it also recognises workforce risks and
pressures and describes how our future workforce needs to be flexible and have the
right skills, knowledge and resources to continue to deliver effective, high quality
services. It also identifies a need for an increasing focus on the terms and
conditions and reward strategies for staff in the years to come, driven by both
affordability and the need for flexibility within reward systems to meet service needs
and sustain organisations.
The Trust’s strategies and operations are underpinned by its Trust values, which are
to be:
Caring and compassionate – we have committed to listening to the views of
others and be considerate in our processes and interactions with others
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respectful – we have committed to supporting and showing respect towards
our staff, encourage their personal development, acknowledge their expertise
and professionalism and value the role they fulfil;
Honest and transparent – we have committed to maintaining open
communication channels and ensuring information is shared widely. Taking
accountability for the actions related to the project
This business case takes these values into account as part of considering the
different ways in which these services could be provided.
1.5 Scope of the Proposal
The support services being considered in this business case are shown in the Table
below. It should be noted that this business case relates only to those services
identified below, and the model of provision for these services, at this point in time. It
does not preclude future consideration of the model of service provision for these or
other services, therefore for example other Trust support services could be delivered
by the subsidiary company at a later stage.
Services In Scope
Estates Services
Estates Maintenance (Note: estates maintenance for community services buildings contracted to Mitie)
Estates Help Desk
Property Specialist Advice
Capital Projects
Energy and Utilities Management
Waste Management
Garden and Grounds Management
Facilities Management
Domestic Services
Portering Services
Laundry and Linen Services
Catering Services
Security & Car Park Management
Switchboard Services (excluding other telecommunications services)
Transactional Services
Transactional Workforce
Recruitment
Employee Staff records (ESR)
Agenda for Change
Transactional Procurement
Contract Management
Purchasing
Catalogues
Transactional Finance
Technical Accounts and VAT
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Accounts Payable
Accounts Receivable
Financial Uploads
Transactional Financial Management
Salary Sacrifice and Employee Benefits
Cashiers and Treasury Management
The scope of services has reduced slightly as there are 12 staff in the Patients
Finance team and two in Facilities who would not be able to transfer at this stage
due to Information Governance requirements that have not yet been met.
The subsidiary company would either provide these services directly for properties
from which the Trust operates or it would manage contracts with others for the
provision of some of these services. The latter includes, for example, services which
the Trust provides on the Campus for Ageing and Vitality and the Tranwell Unit
(based on other NHS FT sites); Walkergate Park and St. George’s Park (PFI
hospitals); or any of the leases that we have for properties where the landlord does
not want to novate the lease to the subsidiary company.
Further information on the services is provided in the following section.
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2 CURRENT SERVICE PROVISION
This section describes the services being considered in this proposal,
including staff numbers; current budgets and recent financial savings; and
some performance related information.
2.1 Staff numbers and budgets
The staff numbers and current budgets are shown in the table below. To note that
there are an additional 7.5 w.t.e. staff in the capital projects team within the Estates
Department who are not included below and who are charged to capital schemes.
Staff numbers are shown as whole time equivalents – the headcount is circa 620
staff.
Staff Staff
Non-Staff
Total
WTE
£m Budget
£m Budget
£m Budget
Estates and Facilities
Estates 104.06 3,429
Facilities 417.01 9,198
Subtotal 521.07 12,627 0 12,627
Transactional Services
Finance 21.80 619
Salary Sacrifice 2.75 79
Procurement 13.83 406
Workforce 24.14 579
Subtotal 62.52 1,683 0 1,683
Non Pay Budget 12,032 12,032
Total 583.59 14,310 12,032 26,342
It should be noted that the Trust has recently undertaken a large scale
transformation programme covering a range of corporate services with the aim of
improving the provision of these services whilst also achieving financial savings - a
target of delivering £3.7m savings over the financial years 2015/16 and 2016/17.
Of this total, £0.9m was delivered from Estates and Facilities and £0.6m from
Transactional Services (£1.5m of the £3.7m target) from a combination of pay and
non-pay savings and an increase in income contribution.
The transformation programme involved extensive engagement with staff and is
being followed on with formal consultation. The most recent consultation, for staff in
the Transactional Teams included in the scope of these services, commenced on
30th August 2016 and was fully implemented in December 2016.
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2.2 Service Performance
There are a number of ways in which the performance of the services in this
document can be assessed, with particular assurance being able to be obtained
where there is national benchmarking.
The Care Quality Commission inspection in June 2016 resulted in the Trust
achieving an “outstanding” rating. As the CQC assessment includes the quality of
service user accommodation, this reflects well on the estates and facilities services.
The national PLACE assessments provide a snapshot of how providers are
performing against a range of non-clinical activities which impact on the patient
experience of care, including cleanliness; the quality and availability of food and
beverages; the extent to which the environment supports the delivery of care with
privacy and dignity; the condition, appearance and maintenance of healthcare
premises; whether premises are equipped to meet the needs of people with
dementia; and a new category for 2016 which looked at aspects of the needs of
those with disabilities and how well hospital environments meet them.
The most recent 2016 benchmarking information, summarised in the table below,
shows that for all of these categories the Trust’s overall scores were above the
national average.
Cleanliness Food Privacy and
Dignity
Condition, Appearance
and Maintenance
Dementia Disabilit
y
NTW Average 99.26% 89.52% 94% 95.55% 82.49% 82.55%
National Average
98.06% 88.24% 84.16% 93.37% 75.28% 78.84%
Variation + 1.2% + 1.28% + 9.84% + 2.18% + 7.21% + 3.71%
“ERIC” data also provided a range of national benchmarked data for estates
services. Some key, high level comparisons for 2015-16 are shown overleaf. For
overall cost for estates and facilities services for mental health and learning disability
Trusts’, NTW’s costs lie between the lower quartile and the median; for the cost of
eradicating backlog maintenance we are just above the median; for cleaning costs
per occupied floor area we are at the median; and for in-patient food services costs
we are also at the median.
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The estates department includes the Capital Projects Team which has led the Trust’s
work to significantly improve our patient accommodation over the last decade. The
performance of the team is reflected in the large number of regional, national and
international awards which our new developments have won since NTW was
established and the Capital Projects Team winning the national Estates Team of the
Year in the 2015 Building Better Healthcare Awards.
With regard to the transactional services proposed to transfer into the company,
there is some recent (October 2016) data collected for STP purposes which
benchmarks the costs of a range of support services across the STP, Trust type, and
nationally. The data has not been validated yet and it should also be borne in mind
that the recent restructuring of the finance, HR and procurement service in NTW,
which included forming an integrated Transactions Department, means that we
operate differently from more traditional NHS structures and this makes comparison
of the specific functions used in this exercise more difficult. However, with these
caveats the table below provides some benchmarking data based solely on cost (per
£000) and not quality.
Function NTW STP area Trust type (MH & LD nationally)
National All Trusts
Accounts payable – cost per invoice
£0.004 £0.003 £0.004 £0.003
Accounts payable per £100m turnover
£75.7 £60.6 £73.1 £67.0
Accounts receivable – cost per invoice
£0.021 £0.014 £0.017 £0.009
Accounts receivable per £100m turnover
£21.2 £31.0 £31.2 £29.1
Capital Accounting per £100m turnover*
£18.3 £18.3 £19.2 £18.2
Charitable funds per £100m turnover
£7.4 £8.6 £4.2 £5.8
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Procurement – function cost
£342.5 £593.5 £243.7 £567.0
Procurement costs per £100m turnover
£108.0 £190.7 £130.5 £208.2
As referred to above, whilst the allocation of costs to specific functions makes this
benchmarking more questionable, the Trust compares favourably when looking
overall at the cost of the “finance function” – see table below
Function NTW STP area Trust type (MH & LD nationally)
National All Trusts
Cost of Finance Function*
£1,889.6 £1,889.6 £1,666.8 £1,982.0
Cost of Finance function per £100m turnover
£595.8 £621.7 £838.7 £776.6
*figures in tables above provided from national data source – possible discrepancy for STP area
figures
In summary, it is considered that the services being considered currently provide a
very good service from a quality perspective, as evidenced by the Trust’s CQC
outstanding rating; the PLACE estates and facilities assessments which are all
above the national average; and the range of awards for our building developments.
In terms of cost the Eric data shows that the costs of overall estates function,
cleaning and in-patient food are around the median level, as is the cost of
eradicating backlog maintenance. For financial and procurement transaction costs,
we have higher costs for some services and lower costs for others, which may reflect
our different “transactions” structure, but the overall cost of the financial function is
below the national average.
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3 CASE FOR CHANGE - SUMMARY
The case for change can be summarised briefly as:
there is a strategic national imperative through the Carter Report and STPs
to review and change how support services are provided;
the quality of the support services being provided is very good but this
provides an opportunity to consider if and how they could be further
improved;
there is a requirement for the Trust to make significant financial savings, part
of which will need to be delivered by support services, so there is a case for
considering how these services could be provided in different cost effective
ways, helping to enable the Trust to continue to provide sustainable and safe
clinical services;
our staff are our greatest asset and without them we could not provide and
sustain our excellent care to those who need it. We place importance on the
Trust values relating to our staff and are committed to ensuring staff are
recruited, retained, developed and engaged throughout their careers.
Therefore, within the context of change already happening strategically in
how support services are provided in the NHS, there is a case for
considering how the Trust can best manage this for its services and support
services staff;
the Trust has also identified workforce pressures and risks in its Workforce
Strategy and the need to consider flexibility in its workforce and reward
systems to address these pressures, meet service needs and continue to
deliver high quality services
there is an opportunity to consider how we can build upon our CQC rating
and better use the expertise of staff in these services and to identify
commercial opportunities
It is therefore considered that there is a strong case for change. The next section
considers different ways in which changes could be made to improve the way in
which services are delivered.
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4 OPTION APPRAISAL
This section describes the option appraisal, including the benefit criteria to be
used in evaluating the options (derived from the objectives which the Trust
wants to achieve); the identification of possible options; and the appraisal of
these options to identify the preferred option.
4.1 Objectives and Benefit Criteria
The objectives of the proposal, set out in Section 1, have been used to derive the
following benefit criteria to evaluate the options.
Quality of Support Services - the extent to which the options would improve the
quality of support services provided to the Trust’s clinical services. This includes the
potential for improvement through more transparent management and reporting
against key performance indicators; and consideration of the nature of the working
relationship between the Trust and the service provider e.g. the level of flexibility
which the Trust would have in how services are delivered and responsiveness to
requested contract changes from the Trust
Staff Considerations - the extent to which the options would impact on staff, including
staff security, recruitment, terms and conditions of service, and opportunities for
existing NTW staff. It takes into account consideration of the Trust’s commitment to
its staff in line with the Workforce Strategy, including the Trust values relating to its
staff
Cost Savings – the extent to which the options would deliver a contribution to the
Trust’s financial delivery plan.
Sustainability and Deliverability - how sustainable would each option be going
forward; and the impact on sustaining Trust services due to differing timescales
involved in establishing each option and delivering financial savings.
Potential for Income Generation - the extent to which the options could generate
additional income to the Trust through selling services to other organisations
Minimising disruption to services - this criterion has been added to those above,
which were directly derived from the objectives of the proposal, recognising that any
major change has a risk of causing disruption to services.
4.2 Identification of Options
The following options were identified in order to compare the proposal with other
possible ways of achieving the objectives.
Do Nothing. This option would involve retaining direct management of the services
as they currently exist. However this option would deliver no efficiency savings and
place higher risks on the current workforce due to the Trust’s efficiency requirement
and lack of workforce flexibilities. The Project Board considered that this option
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would not be feasible or sustainable and that it should therefore be rejected. (Note:
it is common in option appraisals for either a do-nothing or a do-minimum option to
be included)
Do Minimum. This option would involve retaining direct management of the services,
to an agreed standard, with a reduction in posts and other measures to achieve
savings of circa £250,000 in 2017/18.
Subsidiary Company This option is the proposed solution, as explained previously
in paragraphs 1.3 and 1.5. It would involve the transfer of staff and budgets to the
subsidiary company and the transfer, where possible, of Trust buildings to the
company (usually through a lease but by exception through the freehold); and the
procurement of supplies. This would enable the subsidiary company to deliver a fully
managed Operated Healthcare Facility service to those buildings that are leased or
owned by the company - this service would be provided through a detailed contract
based on commercial terms and require approval From Her Majesty’s Customs and
Excise. The Trust has also specified that approval from the NHS Pensions Scheme
for access to their schemes for staff transferred to the subsidiary company would be
necessary. The subsidiary would be part of the NTW Group, with the Trust reserving
agreed powers.
Shared Services This option would involve one or more parts of the NHS providing
support services for other local NHS organisations, thereby releasing savings from
economies of scale. This is currently done locally e.g. NTW itself provides a shared
internal audit service across the north-east; and Northumbria Healthcare NHS FT
provides payroll services for other local Trusts, including NTW. The development of
shared services is being promoted in the local STP. As explained in Section 1 the
scope of support services to be included in shared services is still under
consideration and could cover a range of other services than those being considered
in this proposal. It is considered that they would not be implemented until 2018/19 at
the earliest and possibly later. If this was option involved developing a subsidiary
company, similar approval from the NHS Pensions Scheme would be required, as for
the NTW subsidiary company option above.
Outsourcing This option, commonly used in business and increasingly in recent
years within central government and the public sector more widely, would involve the
contracting out of the services in this business case to a private company. It is a
practice that is commonly used to reduce support services costs. Local examples
include our own Trust outsourcing maintenance work for our community services
buildings to Mitie (a national strategic outsourcing company) and several other local
providers outsourcing their laundry and linen services to a private company.
4.3 Option Appraisal
Each of the shortlisted options above, were considered and appraised against the
benefit criteria by the NTW Project Board, including the staff side observers on the
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Project Board. The Group Director for Inpatient Services was also involved to
provide input from the Trust’s clinical services.
The scoring methodology, previously agreed by the Trust Board, uses ticks and
crosses to represent relative strengths and weaknesses of the options against each
benefit criteria in a range from to 0 (neutral) to XX. The outcome is summarised
in the table below. The Project Board based the appraisal around the “Do Minimum”
being the baseline option, which was therefore scored as “0” against each criterion.
Do Minimum Subsidiary Company
Shared Services
Outsourcing
Quality of Service
0 x 0
Staff Considerations
0 0 x xx
Cost Savings
0
Sustainability and Deliverability
0 xx x
Income Generation
0 0 x
Disruption to Services
0 x xx xx
Net Score
0 4 - 5 - 5
4.3.1 Quality of Service. It was considered that a subsidiary company would be
able to deliver an improved quality of service based upon both it and the Trust being
able to focus on their “core business”, with better performance management
arrangements in place. It was felt that whilst this was also applicable to the
outsourcing and shared services options, disadvantages would be the typically
tighter management of contract changes and ad hoc jobs requested by the Trust,
and less flexibility in “how” services are provided. For the shared services option it
was additionally felt that common performance measures used across all
organisations could impact adversely on NTW’s existing quality of service. It was
also taken into account that the view from the Trust’s clinical services (Business
Delivery Group) was that those options which would release their staff’s time, e.g. on
procurement of supplies, would help them in delivering their clinical services.
4.3.2 Staff Considerations. In comparing the options, it was considered that the
advantages and disadvantages of the do minimum and subsidiary company options
balanced out, with concerns about the future sustainability of the do minimum option
relating to staffing considerations being reflected in the sustainability and
deliverability criteria below. The shared services option was scored lower
recognising risks and uncertainties around job losses, staff relocation and changes in
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team structures. For the outsourcing option there would be additional factors relating
to risks around longer term protection of NHS terms and conditions for transferred
staff and ongoing level of commitment to the ethos of NTW.
4.3.3 Cost Savings. Significant cost savings are identified from establishing a
subsidiary company (see the Financial Model, paragraph 5.2). It was considered
that although an outsourcing company could realise greater operating savings, the
typical outsourcing company profit margin plus central overhead costs would reduce
the savings passed back to the Trust. The outsourcing option was therefore marked
lower. For the shared services option it was considered that although savings would
be realised, the forecasted level of savings across the STP area is less certain at this
stage and less certainty about how savings would be shared across the STP area.
Therefore the shared services option was also marked lower.
4.3.4 Sustainability and Deliverability. The subsidiary company option was
assessed as being a more sustainable solution for future years than the “do
minimum” option, although this is mitigated by some uncertainty about future STP
shared services plans and how these will be implemented. The outsourcing and
shared services options were given negative values reflecting the need to make
significant financial savings from 2017/18 and the timescales involved in these
options realistically delivering savings, as well as a longer period of uncertainty for
the staff concerned.
4.3.5 Potential for Income Generation. The appraisal against this criterion was
based upon the ability of a subsidiary company to be able to respond quickly and be
able to develop commercial opportunities to generate income for the Trust,
compared to a shared services organisation having to share new income across the
organisations involved and an outsourcing company retaining any new income
generated.
4.3.6 Minimising Disruption to Services. It was considered that all the options
would involve greater disruption than the do minimum option. However it was
assessed that the level of short term disruption to the Trust and its services around
implementing the subsidiary company option, which essentially involves NTW staff
working together, would be less than the disruption in implementing either the multi-
organisational shared services option or the outsourcing option involving developing
a working relationship with a third party.
4.4 Identification of Preferred Option
4.4.1 Sensitivity Analysis. The analysis above identifies the proposal to establish a
subsidiary company as the best scoring option. However, as part of the option
appraisal process, the scoring methodology should be subjected to a sensitivity
analysis in order to test its robustness. In reviewing the scoring, the only issue that
has been identified is the view from the Staff Side that he staff considerations score
should be reduced to X as staffing issues have been unsettling for staff. If that score
was reduced to X and therefore the total score to 3, that would not materially affect
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the outcome of the option appraisal and the identification of the subsidiary company
as the preferred option. This was discussed and agreed with the Staff Side.
However, all options have risks and therefore it should also be considered whether
this option presents any risks which are considered significant enough in comparison
to the other options to prevent it being selected as the preferred option.
There is a risk of a delay in the proposal being implemented, although if so this
would likely be for only two or three months. There is considered to be a greater risk
of delay, beyond the assumed start of 2018/19 for the shared services option, as
these plans are at a very early stage and because of the number of organisations
involved. There would also be a significant risk of opposition to the outsourcing
option which could delay implementation beyond the assumed start of 2018/19 for
that option.
There is a risk that the subsidiary company option could be impacted upon by the
STP shared services plans. As previously stated the scope of services to be
included in the STP shared services plans are still under consideration. Not
progressing with the subsidiary company option would delay the generation of
financial savings and would not prevent the Trust reviewing the future development
of a wider STP Subsidiary Company if a more collaborative approach is developed
over the coming years.
There is a risk of not obtaining external approvals to this proposal from Her Majesty’s
Revenue and Customs and/or the NHS Pensions Agency (as stated earlier).
However, this is significantly mitigated by similar proposals having been set up
elsewhere in the NHS.
For the subsidiary company option there are risks around the complexity of
governance arrangements, service quality and staff “buy-in” to the proposal.
However, it is considered that these risks would also apply to the shared services
and outsourcing options, to an equal or greater extent. Further information on risk
management is included in paragraph 7.3.
On the basis of the subsidiary company proposal scoring best against the benefit
criteria and after the consideration of relative risks it is recommended that the
subsidiary company option is selected as the preferred option.
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5. THE PREFERRED OPTION
This section describes the preferred option in more detail, summarising the
benefits that the subsidiary company should deliver; staffing; the financial
model; asset transfers; governance arrangements; and operational working
arrangements
5.1 Benefits
The preferred option will enable a number of benefits to be realised for the Trust.
These will include:
establishing a company to provide cost effective and quality support services,
which focuses on this and this alone, enabling the Trust to focus on its core
services
helping to improve quality through detailed service specifications and KPIs as
part of the Operated Healthcare Facility Contract and Service Level
Agreements
enabling the company to change the culture and develop new ways of
working more effectively (which would be more difficult to achieve within
directly managed Trust departments) whilst the company would still share the
Trust’s values, ethics and aspirations
transferring performance risks relating to these services from the Trust to the
company, with clear accountability arrangements
delivering a significant and tangible contribution to the Trust’s financial
delivery plan, supporting NTW to continue to deliver sustainable, high quality
and safe services
allowing more flexibility to recruit and retain staff to provide these support
services, addressing workforce pressures and risks
offering more security to NTW support services staff, compared to other
possible options, as the Trust would retain specified reserved powers over the
company
providing greater flexibility and freedoms for the Trust’s subsidiary company,
enabling it to build upon the expertise of its staff and systems and develop a
more commercial focus, with the aim of being better able to seize
opportunities to generate additional income, for the benefit of the NTW Group
providing an efficient, effective and quality managed equipment and
consumables service which will deliver operational efficiencies from the
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standardisation and rationalisation of products, including a more joined up
approach between estates and facilities and procurement services
5.2 Staffing
Information about existing staff numbers is provided in Section 2.
The key points relating to staff in this proposal are:
All staff employed in these support services at the date of the company
becoming operational will be transferred to the company under the terms of the
“Transfer of Undertakings (Protection of Employment) Regulations 2006” as
amended by the “Collective Redundancies and Transfer of Undertakings
(Protection of Employment) (Amendment) Regulations 2014”. These
regulations are known as TUPE and apply to all organisations of all sizes and
protect employees’ rights when the organisation or service they work for
transfers to a new employer. In effect this means that staff would transfer with
their current terms and conditions of service being retained. This covers basic
pay, holidays, overtime rate and sick pay entitlements. Staff transferring into
the new company under TUPE would also continue to receive the
enhancements they receive under Agenda for Change for on-call payments,
working weekends, bank holidays, unsociable hours etc. Section 6 provides
information on the main themes which have emerged through the formal TUPE
consultation process
An application has been made to the NHS Business Services Authority, which
administers the NHS Pensions Scheme, to ensure that all staff who transfer
under TUPE regulations will continue to be able to access their NHS Pension
Scheme. Under new procedures, final approval is only received following the
transfer of staff to the new company. However, a “letter of comfort” has been
received from the NHS Business Services Authority stating “In line with this
policy, and assuming that all the evidence is provided and the requirements of
HMT’s Fair Deal policy are met, I can formally confirm Department of Health’s
intention to grant NTW Solutions Limited a direction and/or a determination for
eligible staff who are part of the compulsory transfer from Northumberland
Tyne and Wear NHS Foundation Trust due to take place on 01/04/2017”. The
Trust has given a commitment that should approval not be received the
subsidiary company would not go ahead and that continuity of NHS service
would be honoured for pension purposes.
New pension arrangements for new staff joining the company will be
established, as they would not be able to access the NHS Pension Scheme.
This would be provided under “NEST”, the new workplace pension scheme
set up by the Government.
Any future changes to terms and conditions for staff under TUPE would be the
subject of due consultation with those involved and their representatives. It is
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not the current intention of the subsidiary company to make any such
changes.
Any changes in job descriptions e.g. to reflect future service developments,
will be discussed with the individuals concerned, with formal consultation
where required, in line with current Trust practice.
Staff will continue to work in their current locations but, as currently within the
Trust, locations could change with any future service developments. Any
changes would be discussed with the individuals concerned and their
representatives with formal consultation where required.
The new company would establish its own terms and conditions of
employment for new staff joining the company. These are being finalised and
will be agreed by the Company Board. This will enable the subsidiary
company to create a more flexible workforce, helping it to be more responsive
to commercial opportunities that will arise. It will allow more flexibility to
recruit and retain staff to provide these support services, addressing
workforce pressures and risks. It also provides opportunities to attract staff in
areas where there are recruitment difficulties by offering a more flexible,
person centred reward package.
Staff in the new company would remain eligible for salary sacrifice schemes
such as public transport passes on the Trust travel scheme, lease cars,
childcare vouchers, home computers and NHS for the local gym, shops etc.
The new company, as part of the NTW Group, intends to honour the Living
Wage agreement in line with the Trust.
The Trust’s Workforce Strategy is part of the range of Trust strategies that
underpins what NTW does. The new company will be committed to retaining
these principles and the Trust’s commitment to them will continue for those
staff moving into the new company.
The company will continue to recognise and value staff side colleagues and
place great importance on partnership working throughout this change
process and in the future
The new company will set up a forum to enable it to meaningfully involve,
engage and inform its staff. Any negotiation or consultation on employment
matters will follow normal Trust consultation arrangements with staff side and
Trade Unions, in a separate company forum.
The Health and Wellbeing of the workforce moving into the subsidiary
company is important. This has been taken into account throughout the
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consultation process and will continue into the operation of the subsidiary
company. Support will be available for staff and managers to guide them
through the transition.
The subsidiary company would continue the Trust’s commitment to training
and education in line with the Trust’s Workforce Strategy by continuing to
educate and equip staff with the necessary knowledge and skills to do their
job.
An Organisational Development Plan will be developed and implemented by
the company over the first six months.
The setting up of a new company and the proposed transfer of staff to it
involves changes for those staff. The Trust has recognised that such change
brings uncertainty and stress with it and that people cope with this in different
ways. A number of change management sessions were therefore set up,
providing an opportunity for staff to understand how changes can impact on
them and to be aware of coping techniques.
The company will ensure that the Trust values are intrinsic in its operation.
5.3 Asset Transfers and Financial Model
As explained in paragraph 1.3, where possible, the support services to a
hospital or unit would be provided as a managed “Operated Healthcare
Facility.” The Trust’s freehold or leasehold interest in these properties would
transfer into the subsidiary along with the sale of any equipment, furniture and
fittings, plant, vehicles and inventory relevant to these properties or which
relate directly to estates and facilities and the services the company will
provide .
The financial model has been based on the transfer of the Trust’s five non-PFI
hospital sites in Phase 1:
Northgate Hospital
St. Nicholas Hospital
Ferndene
Monkwearmouth Hospital
Hopewood Park
as well as five other owned large sites, namely Greenacres; Rose Lodge;
Brooke House & the adjacent Houghton Day Unit; Silverdale; and the Plessey
Centre.
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Phase 2 will include a review of all other properties, most of which are
leasehold arrangements and where these properties can be novated into the
subsidiary, they will become part of the “Operated Healthcare Facility” model
in the second phase. This is expected to be around October 2017. A
thorough evaluation has taken place in relation to the Phase 1 properties,
giving consideration to a wide range of factors including control, flexibility,
rates and insurance and this has concluded that a long-leasehold interest is
the optimum model for any property transfers.
The financial model has been developed based on 25 year leasehold interests
in the land and buildings and the lease premium has been determined
independently by Cushman and Wakefield. Cushman and Wakefield have
valued the Trust’s whole estate for annual accounts purposes as at 31st
March 2017 and have also provided valuations for the 25 year leasehold
interests in the ten sites listed above as at the transfer date of 1st April 2017.
There are two areas of land on the Northgate site which have annual break
clauses included within the lease contracts to allow for future flexibility. For
the building and land values for these areas, these have been excluded from
the premium payment for the 25 year lease of land and buildings and are
included in the pricing model as an annual rent charge.
NTW Solutions will also purchase the plant, equipment, furniture, inventory
and consumables associated with the services provided by the subsidiary and
as part of the provision of an operated healthcare facility.
The values of all of these assets are as follows:
Assets Values £m
Land and Buildings 33.5
Furniture, Plant, Equipment and Vehicles 2.5
Inventory Equipment (below £5,000 not on asset register) 0.4
Total 36.4
The transfer of assets will be funded through a combination of a loan from the
Trust and equity funding. The financial model is based on a 70 to 30 debt to
equity ratio and in line with the leasehold term the loan will be based on 25
years with the flexibility for bullet repayments of capital. A commercial interest
rate of 3.5% applies. The loan of 70% is a £25.5m loan and the shares issued
total £10.9m for the 30% equity shareholding in the subsidiary.
The financial model assumes that the lease of the properties and equipment
back to the Trust will be on the basis of finance leases for accounting
purposes. This basis has not yet been approved by external audit. The assets
leased back to the Trust as part of the Operated Healthcare Facility include a
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25 year finance lease for the properties and a five year finance lease for the
equipment. Of the £2.9m of furniture, plant, equipment, vehicles and inventory
purchased, £2.3m is leased back to the Trust as part of the Operated
Healthcare Facility and £0.6m are the assets of NTW Solutions purchased for
the running of NTW Solutions services including laundry equipment, cleaning
equipment and catering equipment etc.
NTW Solutions will also have a one off set up cost for the purchase of
consumables and stock of £141,000 for the purchase of estates and facilities
stock, catering stock and for the consumables in the stores cupboards in the
Operated Healthcare Facilities. This will be expensed in year and does not
form part of the asset transfer and funding arrangements.
The service contracts and “Operated Healthcare Facility” agreement will also
be based on a 25 year model and the contracts are based on commercial
terms.
The pricing model is based on the unitary payment for the provision of the
Operated Healthcare Facility and the service contracts for the services
outside of the Operated Healthcare Facility being £30m in 2017/18.
Pricing Model / Financial Projections Values £m
Income 30.0
Expenditure (including year 1 set up costs) (27.0)
Earnings before depreciation, interest and tax (7.0%) 2.0
Depreciation, interest payable and taxation (1.0)
Profit after tax 1.0
Taxation - Corporation tax will be payable on any profits made by the
subsidiary.
The Trust will make a leasehold sale of the above sites, and at the values
stated above, prior to any operational activity or trading taking place. Under
VAT Notice 742A:opting to tax land and buildings, the Trust will opt to tax the
land and buildings and therefore the transfer of assets and premium for the 25
year leasehold interest will be a taxable supply. Based on the values of
£33.5m, this will be a tax charge of £6.7m. An application for off-setting will
be made to HMRC as an inter-group transfer so the tax would not be paid or
recovered by HMRC as this would be off-set.
Within the HMRC rules for opting to tax there is a 6 month cooling off period
where there is an opportunity to reverse the option to tax.
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Post the 6 month cooling off period, consideration would need to be given to
the taxation implications of the Trust purchasing back the leasehold interests
in these assets.
External advice has been obtained from KPMG in relation to some of the
assets which will transfer where assets were constructed and assigned the
status of resident residential purpose (RRP). For each of these properties the
Trust certified that within 10 years of the RRP certificate being issued that if a
change in use occurs, then a self-supply charge would apply for the residual
balance of the zero-rated VAT over the remainder of the 10 year period.
Under tax legislation, the grant of a long leasehold interest in these properties
creates a change in use of the properties in the same manner as a freehold
transfer. The Trust therefore triggers the self-supply charge and will repay the
residual balance of the zero-rated tax charge of approx. £11m. As the Trust
will opt to tax all of the transferring properties prior to granting the leasehold
interest transfer the Trust will therefore be entitled under tax legislation to
reclaim the corresponding input tax of £11m.
5.4 Financial Benefits
The Trust’s operational plan identifies a target of £1.5m of recurring delivery in
2017/18 rising to £3m in 2018/19. The subsidiary will achieve these plans
from a combination of pay efficiencies and non-pay efficiencies from the
following:
Creation of a standardised, managed service to ensure clinical and
operational teams have the products and services they need to
operate, reducing waste and freeing up clinical time to care
standardisation and rationalisation of products and improved efficiency
from managed spend categories
reduction in procurement leakage
improved efficiency from a managed service
flexibility to set terms and conditions for company staff and providing a
range of benefits to improve recruitment and retention, reduce reliance
on contractors and allow for more flexibility to react more quickly to
market conditions
improved efficiency from an organisation running on a more
commercial basis with a focus on cost reduction and profit
Efficiencies in pay will be achieved from terms and conditions for new
employees. The terms and conditions for new employees have not yet been
finalised for the subsidiary but we estimate of a 15% reduction in overall cost,
with rising benefits to the company over time through normal staff turnover.
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There would be further savings achieved from a reduction in sickness
absence costs. It is anticipated that sickness absence levels for new
employees to be approximately 2% to 3% in comparison to the current estates
and facilities / transactions department rate of 6.5%.
5.5 Governance Arrangements
There are a number of controls and assurances that will be put in place around the
relationship between the Trust and the subsidiary company. The company has been
registered at Companies House but would only commence trading following approval
by the Trust Board. The key elements of the governance arrangements are:
The Companies Act 2006 – sets out the legal responsibilities of companies
and directors, which the directors of the proposed company would comply
with;
The Company’s Articles of Association (its constitution) - the “Model Articles
for Private Companies Limited By Shares” would form the company’s Articles
in so far as they are modified or excluded by the company’s Articles. The
draft Articles are provided in an accompanying governance paper to this
Business Case, for approval by the Trust Board. They include the following
key provisions:
o All company directors (Chair, Non-Executive and Executive Directors)
to be appointed by the Trust Board. Four directors have been
appointed to the Company to enable it to prepare to operate from 1
April (to be approved by the Trust as part of this proposal), comprising
two non-executive directors, one of whom would be the chair, and two
executive directors. It is intended to appoint a further non-executive
director at a later stage. The Articles provide for a maximum of 6
directors.
o A Trust director (non-executive or executive) may be appointed as a
non-executive director of the company
o quorum requirements for the company’s board
o The Trust Board having the power to terminate director appointments
at any time
o The Trust having approval of company directors’ remuneration
o The Trust Board having the power over allotment of shares
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o Company Standing Financial Instructions – to be agreed by the Trust
Board
A comprehensive Scheme of Reservation and Delegation sets out other
powers, not covered by the Articles, to be reserved to the Trust and those
delegated to the company.
Separation of Trust and company accounts, but NTW Group Annual Accounts
produced
Trust Audit Committee oversight of the company; with the same external and
internal auditors as the Trust
Operationally, the following controls / assurances would also be in place:
o Financial controls – financial controls similar to those in place for the
Trust, including financial approval limits, segregation of duties and
proactive cash management
o An Internal Audit Plan covering company policies and procedures
o Improved and regular reporting to the Trust and the Trust Board on the
performance of the services being provided by the company
Exit Strategy - as the proposed company would be a wholly owned subsidiary
of the Trust, the Trust would have the power to dissolve the company, taking
the assets of the company back into its ownership. In such an event, the staff
employed by the company would be covered by TUPE regulations and the
protection of terms and conditions of service that apply.
5.6 Operational Working
The key features of the day to day operational working arrangements would include:
Services will be provided by the company to agreed standards as set out in
Service Level Agreements (SLAs) with associated key performance
indicators (KPIs). These will include pricing of the service with agreed
tolerances relating to levels of service, based on commercial terms. A list of
SLAs is provided at Appendix 1.
For a small number of services there will be SLAs for services provided by
the Trust to the company. These are for services which are more effectively
and efficiently provided by the Trust, for reasons of economies of scale. The
“reverse SLA’s” would cover:
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o Information Technology
o Some HR services
o Some Financial Management Services
o A General Services SLA covering some training, risk management,
and marketing and design support.
There will be more regular and transparent reporting to the Trust of the
performance of the services provided by the company. The Trust will ensure
that it has the capability and capacity to monitor and review the company’s
performance – the “informed client” role. An experienced estates
professional will be employed by the Trust in a part time capacity to
undertake this role for estates and facilities services and a Trust officer
identified to do likewise for transactional services.
There would be little change in the ways in which Trust staff would access or
requisition services from the company. Contact numbers for help-desks
(estates, recruitment, ESR team etc.) and most processes will stay the same.
Changes that would happen include:
o Direct end user requisitioning of supplies will be reduced, including
disablement of direct ordering through the NHS Supply Chain
o A new system will be provided for Trust staff to request additional ad
hoc supplies and equipment items
o An expanded material management system to more wards and
departments will ensure that frequently ordered goods are topped up
in localised storage area by procurement services staff, thereby saving
Trust staff time
The company will have the necessary statutory policies in place covering the
grievance procedure, disciplinary procedure and health and safety. Other non-
statutory polices have also been developed and will be introduced. Where a
policy is not in place on 1 April, the existing Trust policy would be used until
such time as it is replaced with a company policy.
There would be less flexibility in moving furniture and equipment between
buildings (this is required as part of the management of the Operated
Healthcare Facility contract as the company would own the assets in the
buildings covered by this contract).
Company staff who wear uniforms will have new “NTW Solutions” branding on
their uniforms
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5.7 Information Governance
The company would undertake Information Governance requirements, registered as
a third party commercial organisation. It would receive assistance from the Trust
through the Service Level Agreement, endeavouring to obtain Level 2 IG Toolkit
status by the end of its first year of operation. Information Governance Policies and
Procedures will be in place.
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6. COMMUNICATIONS AND ENGAGEMENT
This section describes the communications and engagement that has taken
place with stakeholders, particularly the staff who would transfer to the
subsidiary company. It also sets out the main themes emerging from the
TUPE consultation with staff and other staff engagement forums.
6.1 Communications and Engagement Working Group
A Communications and Engagement Working Group was set up, comprising of some
of the Project Team plus the Trust’s Deputy Director of Communications and
Corporate Relations and Staff Side representatives. This group developed a
Communications and Engagement Plan, identifying stakeholders and means of
communicating, engaging and consulting with them. The Plan was approved by the
Project Board and has been implemented, with updates reported to the Project
Board.
6.2. Communications with Stakeholders
The table below summarises the Communications Plan, showing the main methods
used in communicating with stakeholders
Stakeholder Communications and Engagement
Staff who would transfer to new company
4 series of staff roadshow meetings (at main hospital sites) from October 2016
Question post-boxes on main sites
One to One or group meetings with staff as part of formal TUPE consultation from January 2017
Trust Intranet page – including “frequently asked questions” and an explanatory video
Trust Bulletin articles
Estates and Facilities Newsletter updates
Team Briefings
Change management sessions
Organisational development sessions
Other Trust staff Trust Intranet page
Trust Bulletin articles
Presentation to Clinical Groups’ “Business Delivery Group”
Presentations to Clinical Group OMG meetings; Informatics staff; and Administration Managers
Briefing note to staff on procedural changes
Staff Side Observer status on Project Board
Representatives on Communications and Engagement Working Group
Attendance at staff roadshow meetings
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Full time union officers and local staff side meeting to commence TUPE process
Fortnightly meetings with full time union officers and local staff side representatives since the launch of the formal consultation.
Council of Governors Report on proposal to November “engagement session” meeting
Update reports to subsequent Council of Governor and Governor engagement session meetings
Trust Board Presentation on proposal – September 2016
Monthly update reports
NHS Improvement Email correspondence re proposal
Referenced in current Operational Plan for 2017-19
6.3 TUPE Consultation Update
6.3.1 Staff and Staff Side engagement - consultation launched on 11th January
2017 and will conclude on 24th March 2017.
Staff and Staff Side engagement took place through:
site meetings with staff
one to one meetings with staff following the launch of formal consultation
group sessions with staff following the launch of formal consultation
fortnightly meetings with staff side representatives and Trade Union officials during the formal consultation
“Change sessions” were also offered to staff to equip them with the skills to manage and deal with change
Site meetings - these “roadshows” took place in localities in November and December, prior to the launch of formal consultation, then in February and March during the formal consultation. In each month two sessions were held at:
Northgate
St. George’s Park
St. Nicholas
Hopewood Park
and one session each month at Monkwearmouth Hospital.
In November, 2 sessions were held with the Transactions team based at St. Nicholas Hospital (1 for finance and 1 for Supplies and HR)
The November sessions were very well attended, by approximately 350 staff. December - 178 staff February - 163 staff March – 230 staff
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One to One and Group meetings following formal consultation launch – approx. 241
such meetings have taken place to date, mostly on a 1:1 basis but a few group
sessions.
Change sessions – eight such sessions were offered to staff, however the take up
was very low.
6.3.2 The main themes that have emerged from the larger sessions and 1:1
meetings are summarised below;
Continuing to be able to access NHS Pensions – further updates will be provided
to staff on this, including the timing of final authorisation from NHS Pensions
The pride that staff have in working for NTW and the NHS – whilst the subsidiary
company would not be part of the NHS, it is recognised that they would continue
to have a very direct link with NTW in the proposal. In other options (apart from
the do minimum) that link would be less direct. The company will follow up this
important issue through its communications and engagement practices.
Terms and conditions for new company – what it means for retire and return
arrangements, increases in hours, change of base, promotions, organisational
change and for new staff.
Staff continuing to be able to access the NHS discounts that they currently
receive including salary sacrifice options.
Guarantee that protected terms and conditions will not be changed for the
duration of the contract. This was offered initially, then rescinded so has caused
some discomfort.
Will NHS service continue or be recognised if move back to the Trust or to
another NHS Trust
Management of ongoing issues such as absence and performance
Bank staff arrangements in the new company
Practicalities such as; new uniforms, parking permits, statutory & mandatory
training, redundancy entitlements, maternity entitlements, secondment
arrangements
Updated FAQ’s capturing queries raised since the launch of consultation will be
issued to staff towards the end of March.
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6.3.3. Staff Side and the Unison Regional Officer also wrote a formal mid-point
consultation letter to the Trust which is summarised below along with the Trust’s
responses. Unison also fed back specifically on this business case and this
feedback is also summarised below, following discussion at a joint meeting on 27th
February 2017.
Unison state they are opposed to the outsourcing of the staff involved. The
Trust confirmed that this is not an outsourcing situation.
Unison state they oppose a two-tier workforce, impacting on new starters and
those looking for promotion. The Trust confirmed that this was the approach
agreed by the Project Board and Trust Board.
Unison asked for input into the formulation of the terms and conditions for new
staff appointed by the company. The Trust have advised Unison that as they
do not represent members directly affected by these terms and conditions at
this stage they were not invited to be involved.
Unison raised an issue with the accuracy of information , specifically the
‘guarantee’ given around the long term protection of terms and conditions
which was subsequently rescinded, and the concerns about staff being
negatively impacted in terms of promotions being only offered on the new
company terms and conditions. This has been acknowledged by the Trust.
Unison asked how staff would be transferred back to the Trust should the
company dissolve. Discussions took place around the 6 month ‘cooling off
period’ and the Trust’s ability to reverse the TUPE, maintaining pension
continuity of service. Unison asked if a financial risk assessment had been
carried out and it was clarified that it had.
Unison asked how the subsidiary would demonstrate they are working to the
principles of the Public Sector Equality Duty. The Trust confirmed that expert
and advice from the Trust Equality & Diversity Lead would be provided to the
subsidiary to ensure all issues related to equality and diversity are considered,
understood and action taken if necessary.
The option appraisal for staff in terms of the subsidiary company option was
scored as zero and Unison asked that this be changed to an “X” as it was
unsettling for staff. This was discussed and the sensitivity test was explained
along with the scoring having been formulated by the programme board, so
difficult to alter without reconvening and re-scoring all the options. It was
agreed that even if this was moved to an “X” the outcome would not change
i.e. the subsidiary company option would still score the highest.
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Unison queried how the cost efficiencies in pay and sickness absence had
been calculated if the new terms and conditions were not yet finalised or
approved. It was explained that the financial predictions were based on
informed estimates in line with benchmarked organisations.
Unison raised that the previous version of the business case had not
captured all the feedback received to date, specifically around the guarantee
of protected terms. Trust officers explained that feedback was ongoing at the
January draft business case stage and that the main themes from staff
consultation would be collated and included in the final version of the
document.
The proposal has been welcomed by senior managers in the Clinical Groups who
see advantages in the company being able to make financial savings for the NTW
Group and in freeing up some of their staff’s time to focus on their core service e.g.
by expanding the materials management system for supplying consumables
In presentations and updates to Trust Governors’ meetings, pertinent questions have
been asked seeking clarity and assurances about the proposal, including whether
the Trust could “sell-off” the company in the future. Any such future proposal would
require approval by the Council of Governors as this would constitute a “significant
transaction”. (As this proposal is to establish a wholly owned subsidiary company,
as part of the NTW Group, it is not considered to be a significant transaction under
the Trust’s constitution and therefore the Council of Governors is not required to
approve this proposal).
6.4 Next Steps - Communications and Engagement
Communications with Company staff - maintaining strong communications and
involvement with company staff will have a high importance for the company
directors, as part of the change management to new ways of working and a more
commercial culture. There will be a commitment to:
Embedding values
Engaging people
Working with change
Developing leaders, managers and developing talent
Building and maintaining effective teams; and
Measuring the ‘culture’: the health and wellbeing of the organisation
Communications and involvement would continue, for example through the proposed
staff engagement forum referred to earlier in the business case; ongoing intranet
updates; future “frequently asked questions” being addressed; and through the Trust
Bulletin. Further monthly road shows have been planned for the next three months.
Change management sessions will also continue with company staff as part of this
commitment.
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For those staff who were originally included in the TUPE consultation to transfer to
the new company but would not now be transferring on 1st April 2017 (Patients
Finance Team and two staff in the facilities staff bank), there would be continued
communication and engagement to ensure they kept up to date with developments.
Communications with Trust staff – ongoing communications with staff in the Clinical
Groups and in Trust corporate departments would continue, informing them of any
future changes in ways of working; progress in rolling out services to other Trust
sites as part of the Operated Healthcare Facility contract; and through providing
feedback on the company’s performance.
Communications with the Staff Side – the subsidiary company would commit to
continued regular ongoing communications with staff side and jointly develop a new
Partnership Agreement and formal Trade Union recognition agreement.
Communications with other stakeholders - the Trust’s Council of Governors will
continue to receive reports, as required, regarding the performance and
development of the company. Day to day communications with other external
stakeholders will continue and a company web site will be developed.
6.5. Summary
In summary, the Communications and Engagement Plan which was set up by the
Project Team as part of developing this proposal would be revised and used by the
company to reflect an ongoing need to engage and communicate effectively with all
its stakeholders using a range of methods.
To help the company with this, a Service Level Agreement with the Trust will provide
assistance to the company in the design and production of company literature (e.g.
newsletters); support to develop and maintain a company website; support to host
promotional events; and to provide any other support required to promote the
activities and achievements of the company.
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7 PROGRESSING THE PROPOSAL - IMPLEMENTATION
To date, the focus has been on developing the proposal to set up the wholly
owned subsidiary company by 1st April. This section outlines some initial
risks, with the main focus on getting the company started; and also outlines
the key tasks following the 1st of April to develop the company further, manage
the changes, continue to communicate and support staff and start to embed
new ways of working.
7.1 Project Management
It is proposed that the existing Project Team and Project Board, which were set up to
develop the proposal, continue to meet in the immediate implementation period to
oversee the initial setting up of the company. This will help in resolving any
significant issues, mitigating risks etc. during this initial period.
7.2 Risk Management
7.2.1 The Project Team has managed a risk register, reporting to the Project Board
on high level risks with regard to the setting up of the company by the 1st of April.
If the company is set up, it will have its own Risk Management Policy, which will be
similar in procedural arrangements to the existing Trust policy in terms of identifying,
analysing, evaluating, treating and monitoring and reporting risks. This will help to
ensure that there is a consistency of approach within the NTW Group and will
minimise the risks which might occur if the company used a different risk
management process.
As with the Trust’s policy, the company’s risk management policy will emphasise that
risks should be controlled and managed at the level in the company closest to the
provision of the service being delivered. There will be an escalation policy to the
level necessary to manage the risk and all top risks and actions to mitigate those
risks will be reported to the next level.
Any risks which may be identified by the company but which should be managed by
the Trust would communicated to the Trust and vice versa.
The company will continue to manage existing risks that are recorded on the Estates
and Facilities risk registers and also those risks that are managed within the
Transactions Department. A review will be undertaken to ensure that all these
existing risks are appropriately owned by either the company or the Trust.
As previously stated, as the company is part of the NTW Group, this will come within
the remit of the Trust’s Audit Committee.
7.2.2. Initial risks, largely associated with successfully progressing the company are
identified in Appendix 2. The Trust and the company would both need to review
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these risks and any other identified risks, as the company develops and the new
relationship between the Trust and the company is better informed by experience.
7.3. Phased Implementation Plan
Appendix 3 provides a table outlining key tasks which would be undertaken, in a
phased way during 2017/18, to establish the new company on a firm footing and to
embed new ways of working. It is not a comprehensive list of actions and it would be
developed into a more detailed Implementation Plan, if the proposal is approved by
the Trust Board. The focus in the first year would be very much to continue to
provide the Trust with cost effective and quality services from an engaged and
committed workforce, whilst delivering a significant contribution to the Trust’s
financial delivery plan. This would also provide a strong basis upon which the
company could start to develop a more commercial focus to expand its activities.
The Implementation Plan would be agreed by the Company board and used by it
and senior managers in the company to prioritise the company’s work and to monitor
and review progress.
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8 POST PROJECT EVALUATION AND BENEFITS REALISATION PLAN
8.1 Post Project Evaluation
The Trust recognises that project evaluation is important in order to learn lessons for
the benefit of future similar projects. This is the first time that the Trust has
developed such a proposal and therefore inexperience in the nature of some of the
work involved, plus the size of the task and the short timescales involved has made it
quite an intensive task to project manage. Were the Trust to consider increasing the
range of services to be provided by the company or consider setting up another
subsidiary company, there would be very valuable lessons to learn from the post
project evaluation of this work.
The Project Team will therefore undertake a post project evaluation and report to the
Project Board and the Trust’s Resource and Business Assurance Committee. If the
company becomes operational in April 2017, the Project Team and Project Board will
undertake an initial identification of lessons to learn, with a more detailed evaluation
starting in summer 2017.
There will also be follow up sessions after the company has been set up so that staff
can speak about how they feel following the change – this would be progressed as
part of the company’s staff engagement arrangements and provide a valuable input
to the evaluation.
8.2 Benefits Realisation
This business case has described the benefits that are envisaged from developing a
subsidiary company to provide these support services for the Trust, therefore it is
also important to assess the extent to which these benefits are being realised. Some
of these benefits will require a longer timescale to assess than the post project
evaluation above. A Benefits Realisation Plan will be developed which will:
Identify the envisaged benefits in this business case;
Identify a range of measures to be used in the assessment of each benefit. In
some cases this will be hard data e.g. the key performance indicators within
the Service Level Agreements. In other cases this could be through softer
information e.g. relating to change management and staff perceptions
The timescales for undertaking the assessment. Some of these benefits will
be able to be assessed and monitored on an ongoing basis through the
reports that will be produced for the Trust showing performance against key
indicators. However, the assessment of some other benefits will have to be
assessed over longer time periods; and
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The officer responsible for undertaking the assessment
It is envisaged that the post project evaluation and benefits realisation outcomes will
be reported to the Trust’s Resource and Business Assurance Committee and much of
this could also be summarised in the Company’s Annual Report.
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9. CONCLUSION
In conclusion, it is considered that the establishment of a wholly owned subsidiary
company, as described in this Business Case, will:-
provide the Trust with a more sustainable service model for the continued
delivery of these support services, given that national and regional
developments would strongly indicate that “doing nothing” is not an option.
provide a service model which is more in accord with Trust values than other
possible options, including valuing the Trust staff concerned and recognising
their contribution to the recent “outstanding” rating received from the Care
Quality Commission. The governance arrangements would also require the
subsidiary company to carry out its activities in accordance with the vision and
values of the Trust
provide more transparency of performance against standards, facilitating
further improvements in the quality of service provided, whilst recognising that
the reporting system is more complex than current arrangements
provide a significant contribution to the Trust’s financial delivery plan, more
quickly and with more certainty than other options, whilst recognising that it is
a more complex financial model than currently
provide a more robust procurement management system
provide a model which gives the subsidiary company more flexibility to recruit
and retain staff, helping to address workforce pressures
enable the Trust and its subsidiary company to have more focus on their core
functions and also enable the company to develop a more commercial focus,
with the potential to realise future income generation for the NTW Group
provide a governance system which reserves control on key issues to the
Trust, as the parent organisation, whilst also providing the company with
delegated freedoms and flexibility to develop its services and its staff
It is acknowledged that this is a significant change for the Trust and for a large
number of Trust staff. However, in the context that “doing nothing” is not a feasible
option; that this proposal is considered to be a better option than the others
considered; and that it would deliver substantial benefits Trust, it is recommended
that the proposal is approved.
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Appendix 1
SERVICE LEVEL AGREEMENTS FOR SERVICES TO BE PROVIDED BY THE
SUBSIDIARY COMPANY
Note that the scope of service and exclusions are included in the SLAs as required.
General Services (incorporating Leadership, Staff and Development, Policy and
Strategy, and Partnership and Resources)
Maintenance
Helpdesk
PFI Contract Monitoring Services
Property and Compliance Services
Design and Construction (Capital Projects)
Energy and Utilities Management
Waste Management
Grounds Maintenance
Car Parking
Security Services
Linen Services
Domestic Services
Catering Services
Telecommunications
Facility Managed Services
Transport Services
Financial Services
ESR Human Resources Services
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APPENDIX 2
RISK MANAGEMENT – KEY RISKS
RISKS
MITIGATION
That the Pension Direction Order may not be approved to secure continuing access to NHS Pension Scheme for NTW staff who would TUPE to the subsidiary company
“Letter of comfort” received from NHS Business Services Authority (NHS Pensions) confirming the intention to issue the Direction Order following the TUPE transfer of staff.
Many examples of similar proposals being approved – this is not new.
QE Facilities acting as consultants
This is regarded to be a low risk
That there will be insufficient capacity to progress the works to be undertaken post 1 April to consolidate the company and start to deliver the range of benefits envisaged
The work to progress tasks post 1 April can be spread out to a wider range of staff within the company
The Implementation Plan work will be prioritised by the Company Board.
The high level of work post 1 April is acknowledged but it is considered that this is manageable and therefore a low risk
That HMRC approval of financial model may not be obtained
Many examples of similar arrangements being approved – this is not new
Use of QE Facilities model to guide the process
Specialist resource available from QE Facilities - have been authorised to act on NTW’s behalf with HMRC
There will be ongoing dialogue with HMRC
This is considered a low risk in view of the mitigation factors above
That EU procurement rules may not be complied with
“Teckal” in house companies (named after case which established this) exempt such companies from EU public procurement rules where control of the company by the single shareholder is shown through the governance structure; and where there is a limit of 20% trading with other parties
Bond Dickinson acting as legal advisors on Articles of Association for the company, to ensure we meet the governance “control test”
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Many examples of similar arrangements
This risk would only occur through a legal challenge, post operation, and is considered to be a low risk.
That there will be an impact on the Trust if the company is wound up and staff and assets are transferred back to the Trust returned.
Staff would be TUPEd back to the Trust and the implications of this and any tax implications would need to be considered at that point in time
That the complexity of setting up and implementing new arrangements - new systems, transactions and pricing structure etc. impacts adversely on the Trust through changes in procedures causing confusion and inefficiencies in Clinical Groups and other corporate departments
Use of QE Facilities guidance, templates etc. to help set up the new arrangements
Training for company staff on new arrangements to minimise short term disruption
Information has been provided to wider Trust staff groups, including on changes to procedures, to minimise short term disruption
The main change is in ordering supplies within the limited OHF contract sites and guidance is on the intranet and there is helpdesk support
Benefits of clearer accountability and focus on respective core businesses; more focus on performance of support services etc. to offset increased governance complexity
It is acknowledged that this involves additional systems but the benefits are considered to significantly outweigh the risks
That the quality of service of clinical services will be adversely impacted
There will be clearer and more transparent performance management and reporting of standards (KPIs)
Subsidiary company will be able to focus more on its core business
Expansion of new systems e.g. materials management, will release some time particularly for ward staff / procuring consumables.
Clinical Group Directors are supportive of the proposal
This is regarded to be a low risk
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That a delay in being able to complete job evaluations and pay for all posts in the new company before 1 April will cause difficulties e.g. in making appointments, in offering too high a salary
Job evaluations will have been completed for the large majority of posts in the company, including those with the biggest turnover, by 1 April.
Remaining posts to be evaluated are being prioritised
Interim management arrangements will be in place if this risk occurred.
This is considered to be a low risk
That not all Company Policies and Procedures will be in place on 1 April.
Statutory policies will be in place
Other policies are well developed
Trust policies will be used where a company policy is not yet in place
Communication will be made to staff to make them aware
This is considered to be a low risk
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Appendix 3
OUTLINE IMPLEMENTATION PLAN – KEY TASKS
The green shaded boxes indicate the projected start and finish dates, by quarter, for these activities.
Q1: April - June Q2: July – Sept Q3&4: Oct – March 2018
Governance related
Agree and implement scheduled Company Board items
Ongoing development of Company Board
Develop and implement performance and financial reporting system to Trust, including Informed Client
Ongoing development of company policies and procedures
Awareness raising / training for staff on new policies and procedures
Manage the process for Phase 2 sites for OHF (Operated Healthcare Facility contract)
Develop Audit Plan
Commence post project evaluation Complete post project evaluation
Progress Information Governance requirements towards level 2 IG Toolkit
Commence development of longer term strategy
Workforce related
Set up Staff Partnership Group with Staff Side
Complete job evaluations for people appointed to company
Organisational Development Plan developed and implemented
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Organisational change policy for staff (including redeployment)
Consider pay and performance scheme
Development of Workforce Plan
Development of Health and Wellbeing Plan
Organisational Development Plan
Financial
Updating of Financial Model for Phase 2
Procurement
Manage introduction of new procurement processes to OHF sites
Roll out of materials management to future Operated Healthcare Facility sites
Development of Company Procurement Strategy
Communications and Engagement
Development of communications and engagement plan
Develop Customer Care Strategy
Continue staff roadshows on main sites Staff engagement and improvement sessions – 6 monthly
Communicate with and support teams in the company
Set up company website
Communicate with and support Trust Clinical Groups and departments regarding changes